Moody’s: Mexican Government’s Plan To End Oil Exports Raises Risks

(Kallanish Energy, 18.Oct.2018) — The incoming Mexican government’s announcement to end oil exports is credit negative to both Petroleos Mexicanos (Pemex) and to the government’s credit quality, says Moody’s investors Service, in a new report.

The oil company’s operating cash flow would decline and become more volatile under the new refining-focused business model, Moody’s believes.

“Pemex would be exposed to greater foreign exchange volatility, since its income from fuel sales would be in Mexican pesos, while 87% of its $104 billion debt as of June 2018 is in U.S. dollars or other hard currencies.” said Moody’s senior vice president Nymia Almeida.

“The new plan could also force Pemex to import crude, which would add to its cash-flow and foreign-exchange risk.”

The oil company’s credit quality would weaken depending on how much crude it needs to import to feed its refining capacity, Kallanish Energy understands.

Moody’s believes the risk of Pemex posting lower operating cash flow within the next three years is even greater considering the upward momentum on crude prices, and the new government’s stated intention to not increase domestic fuel prices.

Although the federal government has decreased its reliance on oil revenue since its 2013 tax reform, the loss of oil revenue from a loss-generating Pemex could substantially widen Mexico’s fiscal deficit.

Plans to halt oil exports would deprive the government of nearly 2% of GDP (Gross Domestic Product) in revenue, forcing it to raise taxes or abandon its pledge of fiscal discipline.



Moody’s Upgrades Ecopetrol Rating

(Energy Analytics Institute, Piero Stewart, 18.Jul.2018) – The risk-rating agency Moody’s increased the baseline credit assessment (BCA) two notches, to ba1 from ba3 for Colombia’s state oil company.

The agency said the higher BCA was primarily due to Ecopetrol’s “solid metrics and progress in its strategy of growth and adding to reserves, with a reserves replacement index of 126% at the end of 2017,” reported Ecopetrol in an official statement, citing a Moody’s press release.

In the release, Moody’s highlighted Ecopetrol’s four areas of growth:

1. Implementation of improved recovery and infill projects,

2. Exploration,

3. Assessment of opportunities in non-conventional deposits, and

4. Inorganic growth leveraged on its strong cash position.

Moody’s also stressed “Ecopetrol’s solid liquidity and the management team’s commitment to protecting credit metrics.”

The agency maintained Ecopetrol’s rating at Baa3 with a stable outlook.


Moody’s Projects T&T Energy Sector Rebound

(LoopTT, 24.May.2018) – Moody’s Investors Service is projecting an Energy Sector-led rebound in growth to support the fiscal trajectory.

On Wednesday, Moody’s upgraded Trinidad and Tobago’s Trinidad Drilling Ltd.’s (Trinidad) Corporate Family Rating (CFR) to B2 from B3.

The country’s rating outlook remains stable at this time.

Moody’s also noted a narrowing fiscal deficit which it attributed to Government’s restraint and an increase in energy and non-energy tax revenue.

Among the Government’s strategies noted in the report are plans for the liquidation of CL Financial.

Moody’s projects that excluding revenue from asset sales, revenue collection will improve due to higher oil prices and increased gas production, as well as increased non-energy tax collection.
Additionally, the ratings agency stated that the upward revision of energy sector revenue from seven percent of GDP in the original budget to eight percent reflects higher oil prices and increased gas production.
With a full year of production at Juniper in 2018, and prospects for gas production at Shell’s Starfish field to start in the second half of the year, natural gas production could reach 3.8 billion standard cubic feet per day (mmscf/d) by the end of 2018.

Moody’s also identified an increase in corporate tax revenue of more than $500 million in the first half of fiscal 2018 compared to the same period a year ago.


Moody’s Takes Action on Cosan’s Ratings

(Moody’s Investors Service, 17.Mar.2017) – Moody’s Investors Service affirmed the ratings of the notes issued by Cosan Overseas Limited and Cosan Luxembourg S.A. and guaranteed by Cosan at Ba3.

At the same time, Moody’s América Latina affirmed Cosan S.A. Indústria e Comércio’s corporate family ratings at Ba2 (global scale) and upgraded the national scale (NSR) rating to from The outlook was revised to stable from negative.

The action mirrors the change in outlook to stable from negative, on March 17, of the ratings of its subsidiaries Raizen (Ba1 stable) and Comgás (Ba2 stable), both of which are constrained by Brazil’s sovereign bond ratings. On March 15, Moody’s changed Brazil’s outlook to stable from negative and affirmed its issuer rating, senior unsecured at Ba2 and shelf ratings at (P)Ba2.

Ratings affirmed:

Issuer: Cosan Luxembourg SA – $51 million equivalent senior unsecured notes due 2018: Ba3 – $121 million senior unsecured notes due 2023: Ba3 – $650 million senior unsecured notes due 2027: Ba3 Issuer: Cosan Overseas Limited – $500 million perpetual bonds: Ba3 Outlook actions: Revised to stable from negative


Cosan’s Ba2 corporate family rating reflects the group’s aggregate credit risk, and is supported by the company’s diversified portfolio of businesses, including the entire sugar-ethanol chain, fuel and gas distribution, and lubes in Brazil, and its adequate liquidity profile. The company’s diversification, especially towards resilient businesses such as the fuel and gas distribution, translates into a stable cash source over the long-term. We expect Raízen and Comgás to distribute a significant amount of dividends over the next several years, which will be the primarily liquidity source to service Cosan’s obligations.

Constraining the ratings is Cosan’s ongoing corporate restructure, likely high dividend upstream to Cosan Limited — although the company is expected to generate enough cash to fund those dividends and reduce leverage — and an acquisitive growth history. Still, the company has not made any significant acquisitions over the past few years and entered a deleveraging path with strong dividends from Comgás and Raizen. Cosan no longer proportionally consolidates its stake in Raízen, but we continue to incorporate Raízen’s strengths, including its strong cash generation, and risks, such as the exposure to the underlying volatility of the sugar-ethanol business, in Cosan’s ratings.

The bulk of Cosan’s cash generation comes from dividends from Raízen and Comgás and, consequently, we see the debt at Cosan S.A.’s level as structured subordinated to the debt at the operating companies. The recent rating action affirming Raízen and Comgás ratings and outlook change to stable from negative followed the action that affirmed Brazil’s government bond rating to Ba2 and changed the outlook to stable from negative. Although we believe a significant portion of Cosan’s cash flows, represented by Raízen Combustíveis and Comgás, is more resilient than the overall economy in Brazil, these entities are not fully insulated from the deterioration in the domestic environment.

The stable outlook on Cosan’s ratings mirrors the stable outlook on its two main subsidiaries, Raízen and Comgás.

A downgrade of Cosan’s ratings could result from further negative rating actions on Comgás or Raízen or if liquidity deteriorates. In addition, the ratings could be downgraded if total adjusted debt to EBITDA is sustained above 4.0x.

An upgrade of Cosan’s ratings could result from positive rating actions on Comgás or Raízen. In addition, the company would have to maintain an adequate liquidity and gross leverage below 3.2x (All pro-forma ratios including Raizen figures)

Headquartered in São Paulo, Cosan S.A. Indústria e Comércio has a 50% stake in Raízen (Ba1/ stable) and a 62.6% stake in Comgás (Ba2/ stable). With annual revenue of BRL 81.2 billion (approximately $24.9 billion) as of December 2016, Raízen is one of the global leading players in the sugar-ethanol segment with an installed crushing capacity of 68 million tons and also the third largest Brazilian fuel distributor, operating 6,027 gas stations, mainly under the Shell brand name. Comgás, with annual net revenues of approximately BRL 7.0 billion (approximately $2.1 billion) in the same period, is Brazil’s largest gas distributor, providing natural gas to industrial, residential, commercial, automotive, thermal-power generation and co-generation consumers. The company benefits from an attractive concession area strategically located in one of the most densely populated and economically robust regions in the country. Additionally, Cosan produces and distributes automotive lubricants and base oil under the Mobil brand name with net revenues of BRL 1.9 billion ($0.5 billion) as of December 2016. In the fiscal year 2016 Cosan’s net sales reached BRL 7.5 billion (approximately $2.3 billion).


Moody’s Changes Outlook on Argentine Cos

(Moody’s Investors Service, 7.Mar.2017) – Moody’s Investors Service revised to positive from stable the outlook for several companies operating in Argentina, while all ratings were affirmed. The companies’ outlook change follows the revision of the Argentine government’s B3 rating outlook to positive from stable on March 6, 2017.


Arauco Argentina S.A.: the Corporate Family Rating (CFR) was affirmed at B1 and the rating of the senior unsecured notes, guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable), was affirmed at Baa3. The outlook of the issuer was changed to positive from stable and the outlook of the notes remains stable.

Arcor S.A.I.C.: the CFR and the rating of the senior unsecured global bonds was affirmed at B1.

Pan American Energy LLC, Argentine Branch: the ratings of the backed senior unsecured medium-term notes programs were affirmed at (P)B1 and the rating of the backed global medium-term notes was affirmed at B1. The outlook was changed to positive from stable.

Pan American Energy LLC: the CFR was affirmed at B1. The outlook was changed to positive from stable.

YPF Sociedad Anonima: the senior unsecured notes were affirmed at B3. The rating of the medium-term notes program was affirmed at (P)B3. The outlook was changed to positive from stable.


The rating outlook revision for these companies follows the outlook change of Argentine government’s B3 Issuer rating outlook to positive from stable on March 6th, 2017, supported by the rising likelihood that the recently policies introduced, which have laid the ground for future improvements to Argentina’s economic and fiscal strength, and the improvements in Argentina’s institutional strength will be sustained and bring improvements in Argentina’s credit profile.

Moody’s expects that Argentina’s economy will return to growth in 2017 and 2018, supported by the government’s improved policy mix which has sought to reduce inflation and increase investor confidence.

The positive outlook for the affected companies reflects Moody’s view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody’s believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody’s Rating Implementation Guidance.


Moody’s Assigns Rating to Petrobras Notes

(Moody’s Investors Service, 9.Jan.2017) – Moody’s Investors Service assigned a B2 rating to Petrobras Global Finance B.V.’s proposed global notes, which will be unconditionally guaranteed by Petroleo Brasileiro S.A. (B2 stable).

The B2 rating on the proposed notes is based on the rating of Petrobras. The proposed notes are senior unsecured and pari passu with Petrobras Global Finance B.V. and Petrobras’ other senior foreign currency debt. Proceeds from the proposed notes issuance will be used for debt refinancing and other general corporate purposes. The outlook on the ratings is stable.


Petrobras’ b3 BCA, which indicates Moody’s view of the company’s standalone credit strength, considers its high financial leverage, low to negative free cash flow, weak liquidity, local currency volatility risk and operating challenges in a difficult industry and economic environment. Consolidated free cash flow will remain under pressure in the foreseeable future as its upstream business suffers from low oil prices and downstream operations are hurt by low demand, high competition and local currency volatility, at the same time that the company’s new pricing policy for fuel is tested.

Petrobras’ b3 BCA and B2 rating are supported by the company’s solid reserve base and dominance in the Brazilian oil industry, and its importance to the Brazilian economy. Furthermore, the ratings reflect the company’s sizeable reserves at 10,515.9 Mboe, its renown technological offshore expertise and potential for continued growth in production over the long-term.

Petrobras’ B2 ratings also consider Moody’s joint-default analysis for the company as a government related issuer. Petrobras’ ratings reflect Moody’s assumption for a moderate likelihood of timely extraordinary support from the government of Brazil. Despite its stated willingness to stand behind Petrobras, Moody’s believes that the government’s current fiscal situation tempers its capacity to support Petrobras sufficiently to avoid a default. Moody’s continues to assume moderate default dependence between Petrobras and the government. Petrobras’ rating incorporates one notch of uplift between Petrobras’ BCA and its senior unsecured rating.

Petrobras’ liquidity risk has declined over 2016 on the back of $13.6 billion in asset sales and around $10 billion in exchanged notes during the third quarter last year, which helped to extend the company’s debt maturity profile. However, liquidity risk remains significant. As of September 30, 2016, Petrobras’ maturing debt in fiscal years 2017 and 2018 was $7.9 billion and $13.5 billion, respectively, for a total of $21.4 billion in the next 2 years. In addition, the class action lawsuit, the US Securities Exchange Commission (SEC)’s civil investigation and the US Department of Justice (DoJ)’s criminal investigation related to bribery and corruption will negatively affect the company’s cash position in an amount yet unclear. Other threats to Petrobras’ liquidity, as well as to its operating and financial performance, include tax contingent liabilities, execution risk related to the 2017-21 business plan and potential delays in fully executing its asset sales plan.

Petrobras’ ratings have a stable outlook, reflecting Moody’s expectation that, in the next 12 to 18 months, the company’s liquidity and overall credit profile will gradually improve, supported by managerial focus on improvements in operations and capital allocation; further debt refinancing; and additional asset sales, despite the uncertainty around the payment of fines related to the class action lawsuit as well as the SEC and DoJ investigations.

Positive rating actions could be considered if the company raises sufficient sums through asset sales or new debt arrangements to refinance its upcoming debt maturities and significantly strengthen its liquidity profile while also improving operating and financial performance. Although current low levels of capex in connection with asset sales would reduce future revenues and cash flow, actions that further strengthen the company’s liquidity but also help improve operating margins and prospects of leverage reduction are currently likely to have a greater credit impact than possible reductions in production, revenues and reserve base.

Negative actions on Petrobras’ ratings could result from deterioration in its liquidity or financial profile. Downgrades could also be prompted if negative developments from the corruption investigations or litigation against the company appear to have the potential to significantly worsen the company’s liquidity or financial profile.

Petrobras is an integrated energy company, with total assets of $247 billion as of September 30, 2016. Petrobras dominates Brazil’s oil and natural gas production, as well as downstream refining and marketing. The company also holds a significant stake in petrochemicals and a position in sugar-based ethanol production and distribution. The Brazilian government directly and indirectly owns about 46% of Petrobras’ outstanding capital stock and 60.5% of its voting shares.


Moody’s Assigns Rating to Pampa Energía

(Moody’s Investors Service, 6.Jan.2017) – Moody’s Investors Service assigned a B3 Corporate Family Rating (CFR) to Pampa Energía S.A. At the same time, Moody’s assigned a B3 rating to the company’s proposed long term senior unsecured notes. Proceeds from the notes will be used to refinance debt and for capital investments as well as other general business purposes. The outlook on the ratings is stable.

This is the first time that Moody’s assigns ratings to Pampa.


Pampa’s B3 ratings assume a successful merger of Petrobras Argentina S.A. into Pampa, expected to be finalized in the first quarter of 2017. From one side, the ratings consider Pampa’s negative free cash flow, although fueled by expansionary capex in natural gas and power projects, which have favorable prospects; low interest coverage and low retained cash flow compared to total debt, pro forma for the proposed notes; as well as exposure to volatile, highly-regulated power and oil and gas industries in Argentina. On the other hand, these factors are mitigated by the company’s strategy to focus on businesses with positive pricing outlooks, namely natural gas production and power generation; the expected stable demand for electricity and strong demand for natural gas in Argentina; as well as low foreign exchange risk.

Pro forma for the acquisition of PESA, Pampa’s free cash flow will be negative for the foreseeable future, given high expansionary capital expenditures, which are little flexible, compared to operating cash generation. Moody’s assumes that Pampa will issue up to $1 billion in new notes, and thus that its debt burden will be high compared to retained cash flow in the next 2 years: retained cash flow/total debt ratio will hover between 20% and 25% in the next two years (Moody’s considers the $300 million owed to Cammesa, Argentina’s wholesale power market administrator, as short-term payable, not financial debt). Likewise, Moody’s forecasts that the company’s Moody’s-adjusted EBITDA/interest expenses will be below 3.5 times in 2017, which is currently low for a volatile business profile, although with prospects of improvement in the medium term.

Pampa operates in the power as well as the oil and gas industries in Argentina, which are highly-regulated and pose high operating risk. But the industry fundamentals in Argentina for the gas industry in particular are favorable since local natural gas production supplies only 75% of the country’s needs, while the 25% difference is imported from Bolivia and Chile, among others, a situation which should prevail for the next 6 to 7 years, at current local natural gas production growth rate. This dependence on imports of gas, which is paid in kind and with scarce US dollars, sustains solid prospects for the gas industry in the country in the medium to long term. While margins in the refining business have been under pressure given low economic growth and demand for oil products, as well as labor pressure for high wages and benefits, this line of business is small on a consolidated basis.

Similarly, Pampa’s electricity distribution assets are well-positioned to benefit from regulatory reforms and tariff increases, which should come over the course of 2017 and 2018. In addition, the company owns a co-controlling interest in Transener, the largest high voltage power transmission company in Argentina, which has with 20,630 km of transmission lines, equivalent to an 85% market share. However, margins at the power industry have been historically low and Moody’s expects that flat demand for power, in line with the country’s weak GDP growth rate, will challenge the company’s ability to transfer inflation and local currency devaluation costs to power tariffs in later years. For instance, Moody’s estimates that, during 2016, inflation in Argentina was around 30%.

Thus, Moody’s believes that Pampa’s credit metrics related to debt burden and interest coverage will remain in line with its B3 rating in the next 24 months or more, even considering a successful resetting of electricity tariffs at profitable levels, which Pampa expects to happen before the end of February.

Foreign exchange risk is low for Pampa. About half of the company’s costs, mainly in the oil and gas business, is linked to the US dollar and, pro forma for the proposed notes, close to 100% of the company’s debt will be in US dollars. However, close to 80% of Pampa’s EBITDA is generated in the gas and power generation businesses, whose sales are US dollar-linked, although dependent on prevailing exchange rate. While the peso/dollar exchange rate had been controlled and kept low by the Argentine government in the past, since the new government took place, in early 2016, the exchange rate has been set by the market, with limited government intervention.

Currently there is a low level of structural subordination between the holding company’s debt and its subsidiaries’. Pro forma for the merger of PESA into Pampa, close to 50% of the consolidated EBITDA, which Moody’s estimates will reach about $810 billion in 2017, will be generated at the holding level (i.e. at Pampa itself) and will be related to exploration and production of oil and gas. In turn, the holding company will hold about 90% of the group’s debt. Most of the cash-generating subsidiaries in the group are controlled by Pampa at around 99%. However, the proposed notes’ indenture provides for no limit to debt increase at the subsidiaries level, although on a consolidated basis Pampa’s debt leverage cannot exceed 3.5 times on an incurrence basis.

As of September 2016 and pro forma for the acquisition of PESA, Pampa’s refinancing risk is high but would decline significantly after the issuance of the proposed new notes, which Moody’s believes will amount to $1 billion. In addition, the company counts with solid relationships with banks, although credit facilities are uncommitted, and is currently working with Export Credit Agencies and other multilateral financial institutions in order to diversify its external funding sources. The company’s liquidity situation depends on a timely refinancing of upcoming debt maturities of about $760 million in 2017, $100 million in 2018 and $33 million in 2019. In addition, as per the company’s financial policies, it would always maintain a minimum of up to $100 million in cash at all times, which would not be available to repay debt. Furthermore, Moody’s believes that Pampa will spend about $720 million in capex in 2017. However, besides the proceeds from the new notes, sources of cash include a sizable $476 million in consolidated cash on hand as of September 2016, pro forma for the merger with PESA, and about $810 million in EBITDA in 2017, as per Moody’s estimates. Convertibility of local currency into US dollars and transferability of foreign currency abroad are risks also considered in Pampa’s ratings.

The stable outlook on Pampa’s ratings reflects Moody’s expectation that the Argentine power companies will be successful in the current negotiations with the government to increase electricity tariffs, to be set for the next 5 years. It also considers that natural gas prices will remain strong in Argentina given lower local supply vis-a-vis demand.

Pampa’s B3 ratings could be downgraded if the company materially increases its leverage, measured as retained cash flow (funds from operations less dividends) to total debt lower than 10%, or if its interest coverage, as per EBITDA to interest expense, declined to below 2 times with limited prospects of a quick turnaround. Also, a deterioration of the company’s liquidity profile could lead to a rating downgrade.

In turn, a rating upgrade could occur is Pampa’s retained cash flow to total debt ratio is higher than 35% and its EBITDA to interest expense rate is above 6 times on a sustainable basis. An upgrade on the ratings of the Government of Argentina would not necessarily translate into an immediate upgrade of Pampa’s ratings.

Pampa is engaged in generation, distribution and transmission of electric power in Argentina as well as on oil and gas production, refining, petrochemicals and hydrocarbon commercialization and transportation in Argentina and, to a lesser extent, in Venezuela. Pro forma for the merger with PESA, as of September 30, 2016, Pampa was the third largest power generator in Argentina, with approximately 10.6% market share. In addition, it was the fourth oil and gas producer in the country, with an equity oil and gas production of over 58.3 thousands of barrels of oil equivalent per day.


Company Profile: Oleoducto Central S.A. (Ocensa)

(Moody’s, 4.Jun.2016) – Oleoducto Central S.A. (Ocensa) is the largest crude oil pipeline and the only public-use pipeline in Colombia. Its pipeline is ~845 km in length with 745,000 b/d of capacity starting in mid-2016. Ocensa connects the country’s largest crude producing fields in the Llanos Basin at El Porvenir to export facilities at Covenas on the Caribbean coast.

The company is owned 72.65 percent by Ecopetrol through its wholly-owned midstream subsidiary, Cenit SAS. The remaining stakes are owned 22.35 percent by Advent International and 5 percent by Darby Overseas (a subsidiary of Franklin Templeton), both private equity firms. Advent purchased its stake in December 2013 from long-time owner/shippers Total SA, Repsol Oil & Gas Canada Inc. formerly Talisman Energy Inc., and CEPSA, a Spanish refining subsidiary of IPIC, an investment fund of the government of Abu Dhabi.


Moody’s Affirms YPF’s B3 Rating

(Energy Analytics Institute, Jared Yamin, 2.Jun.2016) – Moody’s affirmed YPF Sociedad Anonima’s B3 issuer rating. YPF’s B3 BCA (Baseline Credit Assessment) and its national scale rating remained unchanged.

The outlook on the ratings is stable.


Moody’s Affirms Ocensa’s Baa3 Ratings

(Moody’s, 4.May.2016) – Moody’s affirmed Oleoducto Central, S.A.’s (Ocensa) Baa3 senior unsecured ratings. The rating outlook was changed to negative from positive.

Ratings Rationale

“The equalization of Ocensa’s ratings and outlook to those of Ecopetrol, S.A. (Ecopetrol, Baa3 negative) reflects Moody’s view that Ocensa is not insulated from the credit quality of its main shareholder and controlling entity,” said Nymia Almeida, a Senior Credit Officer in Moody’s. “The change in outlook to negative from positive also incorporates the negative oil production growth trend in Colombia, offset by our expectation that Ocensa will remain the transportation of choice in the country.”

Ocensa’s Baa3 rating reflects its leading industry position in Colombia and strategic importance to Ecopetrol as well as favorable industry dynamics in Colombia in terms of transportation demand for pipelines.

The company’s ratings also incorporate its tariff and contract structure that supports solid margins and predictable cash flow as well as a moderate financial leverage profile. These factors help offset its exposure as a single-asset pipeline, its relatively small scale within the midstream peer group, and a high dividend payout policy.

The company is close to completing its latest major growth project, which will increase its transportation capacity to 745,000 b/d from 610,000 b/d. In addition, the last tariff revision, in late 2015 and valid for the next four years, kept the prevailing tariffs unchanged. Both events will increase Ocensa’s cash generation, which will further strengthen its credit metrics starting in mid2016.

Although political and guerilla risk in Colombia is a lingering concern, Ocensa has not directly experienced any problems in recent years and its 100 percent underground pipeline system gives the company a competitive advantage.

Ocensa has adequate liquidity, with operating cash needs of about $50 million versus the company’s policies to maintain a minimum of $100 million in cash at all times as a cushion. Starting this year, CAPEX will be small and limited to maintenance only. In addition, the company’s next major debt payment is due in 2021. However, Ocensa pays out 100 percent of net profit in dividends, which is detrimental to bondholders. The company has no committed bank facilities but has close relations with Colombian banks.

Although Moody’s expects that Ocensa’s credit profile and cash flow generation will remain strong given its predictable tariff structure and high capacity utilization, the negative outlook reflects Ocensa’s strong ties with Ecopetrol, its controlling shareholder and main off-taker.

Large projects or acquisitions that increase financial leverage could trigger a negative rating action, although Moody’s believes that Ocensa’s management and Ecopetrol are aligned in a desire to maintain modest leverage at the pipeline. A downgrade of Ecopetrol’s or Colombia’s sovereign rating could result in a rating downgrade for Ocensa.

For Moody’s to consider a ratings upgrade, Ocensa would have to sustain current credit metrics but show lower vulnerability to Ecopetrol’s financial profile and have a dividend policy more aligned with the interests of bondholders. An upgrade of Ecopetrol could also result in a upgrade of Ocensa’s ratings. A rating upgrade of Colombia’s sovereign rating would not necessarily trigger a rating upgrade of Ocensa.


Finance Ministry, Pemex Meet With Investors

(Pemex, 19.Apr.2016) – The Minister of Finance and Public Credit, Luis Videgaray, and the Pemex CEO José Antonio González Anaya, met in New York with investors, analysts, and executives of financial institutions to emphasize the economic prospects of the company and investment opportunities that resulted from the implementation of the Energy Reform.

During his two day visit, González Anaya also held meetings with executives of Standard and Poor’s, Moody’s and Fitch rating agencies, as well as financial institutions Goldman Sachs and JP Morgan, where he stressed the relevance of Pemex for the country’s economic development.

Additionally, he shared that alongside the attained budget announcement, Pemex works in the design and implementation of a broad strategy of alliances and associations that will increase the profitability of the company in view of the fall of crude oil prices worldwide.

During the second day of the visit, Pemex’s CEO and Minister Videgaray held two meetings with investors focused on Latin America, during which they reassured the financial support of the Federal Government to Pemex through the injection of liquidity to the company for a total amount of 73.5 billion pesos, and a reduction of its fiscal burden by up to 50 billion pesos for 2016.

During the meetings, investors displayed interest in the measures taken to address the current environment of the oil industry and the possibilities of alliance with the State Productive Company.

González Anaya highlighted that these encounters are a reflection of the high level of interest and trust that the financial community has in Mexico and Pemex.


Pemex Responds to Moody’s Press Release

(Pemex, 25.Aug.2015) – Moody’s Investors Service placed Pemex’s global foreign currency and global local currency A3 ratings under review for a possible downgrade. In this regard, Pemex makes the following remarks:

Pemex, along the entire oil and gas industry has been affected by the substantial decline in international oil prices that began in Jun.2014. Particularly, the Mexican Mix recorded its lowest level since 18.Feb.2008 ($33.71/bbl). In this regard, during that past twelve months, eight of the main global oil and gas companies have either been put to review for downgrade in their credit ratings or on negative watch.

In response to an environment of lower oil prices, Pemex announced in Feb.2015 a MXN 62 bln cut to its 2015 budget, always committed on minimizing the potential effects on production and reserves replacement. And as an example, on 10.Jun.2015, Pemex announced the discovery of new oil deposits, with estimated reserves of 350 MMboe.

Additionally, the company has also been working on several fronts to contain and reduce costs, including the renegotiation of contracts with suppliers, and reductions in costs of personnel services.

Furthermore, and regarding our pension liability, Pemex and the Union met in a timely manner the requirements set forth in the Third Transitory Article of the decree by which several provisions of the Federal Law of Budget and Fiscal Accountability, and the General Law of Public Debt are amended, supplemented and abrogated, having reached an administrative agreement with the Union on 11.Aug.2015, that sets forth the foundations to reduce the pension liability of the company within a period not exceeding 90 calendar days.

Savings generated due to these changes will represent a substantial improvement in the capital structure of the company, not only due to the result of the modifications to the pension scheme, but also by the amount of said liability that will be covered by the Federal Government, in accordance with the Third Transitory article referred to above.

It is important to highlight that Pemex will address the decrease in its revenues with the different instruments made available by the Energy Reform, and with the responsible use of its debt. In particular, the Reform allows the company to associate with third-parties in several ways to carry out its investment projects while maintaining control and ownership of the associated operations.

As part of this strategy, we are working with the Federal Government to carry out the migration of assignments to contracts, and partnerships with third-parties in the areas of exploration and production (farm-outs), as well as new incentivized contracts for the development of fields. Similarly, there are important partnership projects in other areas of the value chain, such as industrial transformation and logistics, which will be disclosed in the upcoming months.

To address the challenges associated with the fall in oil prices and the uncertainty of its duration, Pemex will use every tool available by means of the Energy Reform to improve the financial condition of the company, minimize the effect of current adverse conditions, and reaffirm itself as a pillar of national development.


Moody’s Affirms Petrobras Argentina Notes

(Moody’s Investor Service, 14.Aug.2015) – Moody’s Latin America Agente de Calificación de Riesgo affirmed the Ba2/ global scale rating and national scale rating on Petrobras Argentina S.A.’s $300 million in guaranteed Series S notes (CUSIP 71646JAB5).

The rating action reflects Moody’s Investors Service’s rating action on August 11, 2015 of affirming Petróleo Brasileiro S.A.’s (Petrobras, the guarantor) global debt ratings at Ba2. The rating outlook is stable.


Elevated Corporate Risks in Argentina

(Moody’s Investor Service, 16.Jul.2015) – Economic stagnation, a difficult political environment and heightened volatility in financial markets with the approach of presidential elections will be elevating pressures on non-financial companies in Argentina through mid-2016, says Moody’s Investors Service. Most of the 20 companies that Moody’s rates in Argentina, however, will not see significant deterioration in their credit metrics during this period.

“Weak economic activity and high double-digit inflation will diminish companies’ ability to pass cost increases to their customers, limiting their operating margins,” says Martina Gallardo Barreyro in the report “Corporate Credit Quality in Argentina: Economic Woes Elevate Argentina’s Corporate Risk Through Mid-2016.”

“In addition, a complicated macro environment will keep intensifying liquidity risks for most Argentine companies,” says Moody’s Gallardo Barreyro.

Some rated companies, however, have significantly improved their overall liquidity profile through refinancings of their foreign-denominated maturities. For examples in Jul.2015 Raghsa S.A. pushed back 58% of its $100 million maturities due in 2016-2017 until 2020-2021.

Moody’s expects consumer-related companies to face a slight deterioration in their credit metrics as demand stabilizes.

“Long-term demand growth will require a recovery in real available income, employment levels and general consumer financing conditions, all of which depend on government policies,” says Gallardo Barreyro.

Moody’s expects a sluggish recovery in Argentina only in 2016.

In other sectors, Moody’s expects marketing campaigns designed to capture new customers interested in 4G technology to strain the operating margins of the fixed telephony operators, while a strong increase in public-works spending in 2015 will support revenue growth among construction and infrastructure-related companies.

Commodity driven companies will have slow revenue growth because of falling commodity prices, while the impact of high inflation among them will vary. For example, oil companies such as YPF S.A. will be able to pass along most of their cost increases through to their prices.


Moody’s Maintains Ecopetrol Rating at Baa2

(Ecopetrol S.A., 25.Jun.2015) – Ecopetrol S.A. reported that the credit rating agency Moody’s Investors Service has maintained Ecopetrol’s long term international rating at Baa2 with a stable outlook.

Moody’s mentioned that “the rating affirmation was based on Ecopetrol’s solid business strategy, now focused on expanding exploration activities to increase reserves as well as on improving production recovery and operating efficiencies across the board, which will help the company protect its credit quality through the current cycle of lower oil prices.”

The rating decision also considered, among other factors, Ecopetrol’s leading position in Colombia and the size of its operations.


Moody’s Affirms Ecopetrol Rating

(Moody’s, 23.Jun.2015) – Moody’s affirmed Ecopetrol S.A.’s Baa2 ratings and assigned a Baa2 rating to the company’s up to $1.5 billion in proposed notes due 2026.

The proposed securities are senior unsecured and pari passu with Ecopetrol’s other senior foreign currency debt, which is also rated Baa2. Proceeds from the notes issuance will be used primarily to fund capital expenditures. The rating outlook is stable.


Moody’s Changes PBF Rating Outlook

(Moody’s, 22.Jun.2015) – Moody’s Investors Service changed PBF Holding Company LLC’s rating outlook to positive from stable. Moody’s also affirmed PBF’s Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating, and Ba3 senior secured notes ratings following its announced acquisition of the Chalmette refinery.

“PBF’s positive rating outlook reflects the expected increase in refining scale and geographic diversification, and the potential for better crude sourcing and product distribution ability if the Chalmette refinery acquisition closes as anticipated in 2015,” said Arvinder Saluja, Moody’s VP. “This acquisition builds on PBF’s four year track record of operating its existing three refineries.”

On 19.Jun.2015, PBF’s parent, PBF Energy Inc., announced that it has signed an agreement to purchase the Chalmette refinery with 189,000 b/d throughput capacity from subsidiaries of ExxonMobil (Aaa stable) and Petroleos de Venezuela, S.A. (Caa3 stable). The $322 million purchase price plus an estimated $300 million – $500 million of working capital will be funded using a combination of cash and debt. The transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the 4Q:15.


Moody’s Assigns Ba2 Rating to Petrobras Notes

(Moody’s, 3.Jun.2015) – Moody’s Investors Service assigned a Ba2 rating to Petrobras Global Finance B.V.’s proposed global notes, which will be unconditionally guaranteed by Petrobras. The Ba2 rating on the proposed notes is based on the rating of Petrobras (Ba2 stable).

The proposed notes are senior unsecured and pari passu with Petrobras Global Finance B.V. and Petrobras’ other senior foreign currency debt. Proceeds from the proposed notes issuance will be used for general corporate purposes, including debt refinancing and capital investitures. The outlook on the rating is stable.


Moody’s Assigns Rating to Raízen Energia

(Moody’s, 30.Apr.2015) – Moody’s América Latina assigned a Baa3 global scale and national scale ratings to Raízen Energia S.A.’s proposed BRL 500 million senior unsecured CPR-F (Cédulas de Produto Rural Financeiras) due 2021 and guaranteed by Raízen Combustíveis S.A. The outlook for the rating is stable.

The rating of the proposed CPR-F assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody’s to date and assume that these agreements are legally valid, binding and enforceable.


Moody’s Confirms Petrobras Argentina Notes

(Moody’s, 28.Apr.2015) – Moody’s Latin America Agente de Calificación de Riesgo confirmed the Ba2/ global scale rating and national scale rating on Petrobras Argentina S.A.’s (Petrobras Argentina) $300 million in guaranteed Series S notes (CUSIP 71646JAB5).

The rating action reflects Moody’s Investors Service’s rating action on 27.Apr.2015 of confirming Petrobras’ (Petrobras, the guarantor) global debt ratings at Ba2. The ratings outlook is now stable, also in accordance to Petrobras’ rating outlook. This concludes the ratings review period started in late-Dec.2014.


LNG Projects Nixed Amid Low Oil

(Moody’s, 7.Apr.2015) – LNG suppliers are curtailing their capital budgets, amid low oil prices and a coming glut of new LNG supply from Australia and the U.S.A., Moody’s Investors Service said in its report, “Lower Oil Prices Cause Suppliers of Liquefied Natural Gas to Nix Projects.”

Moody’s says low LNG prices will result in the cancellation of the vast majority of the nearly 30 liquefaction projects currently proposed in the U.S.A., 18 in western Canada, and 4 in eastern Canada.


Moody’s Comments on Braskem

(Global Credit Research, 3.Mar.2015) – Moody’s Investors Service comments that Braskem S.A. announcement of a third extension of its naphtha supply contract with Petroleo Brasileiro S.A. (Petrobras) is credit negative because it fails to set the final conditions for Petrobras long-term contract, although it reduces fuel supply risk.


Petrobras Credit Rating Downgrade

(Petrobras, 27.Feb.2015) – Regarding the downgrade to Petrobras’ debt rating announced on February 24, 2015 by Moody’s, the company emphasizes that it is working to guarantee the transparent and accurate disclosure of its 2014 financial results as soon as possible.

Furthermore, Petrobras is implementing a series of measures aimed at preserving its cash position and reducing its leverage. The company is revising its financial plan and it understands it should be necessary to reduce its investments, increase its disposals and study other options for funding and increasing its cash flow. Petrobras has also been working to enhance its internal controls, as demonstrated by the creation of its Governance, Risk and Compliance Department.

In its operational activities, Petrobras continues to seek to improve its results, as reflected in its successive production records in pre-salt, refining and natural gas supply.

Finally, the company reaffirms that it does not have any covenants related to the ratings downgrade by ratings agencies or related to having ratings below investment grade.


Moody’s Rates YPF’s Proposed Global Notes

(Global Credit Research, 4.Feb.2015) – Moody’s Investors Service assigned a Caa1 global foreign currency rating to YPF Sociedad Anonima’s (YPF)’s proposed $750 million in aggregate in addons to its outstanding 8.875% $587 million notes due in 2018 and 8.750% $1,000 million notes due in 2024. Both series were issued in the global capital markets.

The outlook on the ratings is negative.


Mood’s Downgrades Construtora Andrade Gutierrez

(Global Credit Research, 21.Jan.2015) – Approximately $500 million of rated debt affected.

Moody’s Investors Service (Moody’s) downgraded to Ba2 from Ba1 the corporate family rating assigned to Construtora Andrade Gutierrez S.A. (CAG) and the rating of its guaranteed notes issued by Andrade Gutierrez International S.A. (AGInt). The outlook for all ratings was changed to negative from stable.

The downgrade of CAG’ ratings to Ba2 reflects the sharp deterioration in the company’s credit metrics in 2014 due to weaker than anticipated revenue growth and lower profit margins. Despite the company’s strong liquidity profile and track record of shareholder’s financial support, the change in outlook to negative reflects the deterioration in industry fundamentals on the back of corruption scandals at of Petrobras and macroeconomic uncertainties in Brazil and Venezuela, which could lead to higher execution risks for the company in the near term.

Ratings changed:

Company: Construtora Andrade Gutierrez S.A. (CAG)

–Corporate Family Rating: to Ba2 from Ba1

Issuer: Andrade Gutierrez International S.A. (AGInt)

— $500 million senior unsecured notes due 2018: to Ba2 from Ba1

The outlook for all ratings changed to negative from stable.